Today's Edition
TOKYO (Reuters)
The Bank of Japan (BoJ) kept interest rates unchanged on Thursday but one dissenting board member's proposal to push up borrowing costs showed the bank remains on track to tighten policy early next year.
As widely expected, the nine-member BOJ board voted 8-1 to keep its short-term policy rate unchanged at 0.25% in a sign policymakers preferred to tread cautiously amid uncertainty over U.S. president-elect Donald Trump's economic plans.
However, dissenting board member Naoki Tamura, a known policy hawk, proposed raising interest rates to 0.5% on the view inflationary risks were building. His proposal was voted down.
The BOJ's meeting concluded hours after the U.S. Federal Reserve cut interest rates but signalled a more cautious path of easing next year, sending global stocks sharply lower.
"The decision to keep rates on hold was widely expected by investors, so I don't expect a big market reaction," said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management in Hong Kong.
"That said, the hawkish Fed dot plot overnight gave the BOJ an option to increase rates, and there was one dissenting vote for a 25-bp hike, so it looks like rates will be going up early in 2025."
The yen fell immediately after the decision to hit a one-month low of 155.28 to the dollar, before paring some of the losses. Japan's Nikkei share average (.N225) pared declines as the yen weakened.
Markets are focusing on BOJ Governor Kazuo Ueda's press conference, expected at 3:30 p.m. JST (0630 GMT), for clues on whether the bank could raise rates in January or March.
"The yen has weakened as a result of the BOJ's decision to stand pat. Ueda may thus signal the bank's intention to raise interest rates in the near-term horizon," said former BOJ board member Takahide Kiuchi, who is now an analyst at Nomura Research Institute.
Many market players see a declining yen among key incentives for the BOJ to hike rates or offer hawkish communication, as the currency's weakness pushes up inflation via higher import costs.
